Bank watch: Investors hammer WAMU, Downey Financial

If you are a bank or a thrift, today is not a good day to be in the spotlight. Washington Mutual is in the spotlight.

From Bloomberg News: "Washington Mutual Inc., the biggest U.S. savings and loan, fell the most since it went public in 1983 after Lehman Brothers Holdings Inc. said the lender may report $26 billion in losses this year."

WAMU shares at 11:25 PDT this morning were down 32%, or $1.59 for the day, at $3.36, representing a decline of 91.5% over the last year.

A local bank to watch: Downey Financial. From this morning's New York Times: "In recent weeks, the share prices of some regional banks, like the BankUnited Financial Corporation, in Florida, and the Downey Financial Corporation, in California, have stumbled hard amid concern about their financial health."

Downey shares at 11:25 PDT this morning were down 12.4%, or 21 cents for the day, at $1.48, representing a decline of 97.7% over the last year.

Your thoughts? Other local banks you'd like to see included in coverage? E-mail story tips to peter.viles@latimes.com.
Photo: Bloomberg News

Comments

[Bill]

Washinton Mutual and Downey Federal will be the next takeover target for the Feds. Wow what a mess, and we still have to wait 1/2 a year to see Bush go. We are going into a depression, not a recession.

[Fred]

Ok, now we have to pull out of the Iraq war and we have to do it quickly. We need currency stability. The FDIC is going to have to be re-infused with cash.

[xtine]

I told my mom about the run on IndyMac. She thinks these people are stupid, because the FDIC will cover them. Why run on the bank when the fed will become you personal ATM?

My mother thinks government money will last forever.
She voted for GWB twice.

I love my mother but she, and everyone else, needs to be afraid.

[Michael Snyder]

The impotence of Paulson's actions were confirmed by Wall St. today with shares of Freddie & Fannie continuing their decline into the penny stock range. Although annalist praise the Fed's actions as the best of several difficult choices without exception these experts are compensated by the very folks who stand to benefit from saddling the taxpayer (that would be the us in USA) with yet another 5 trillion in debt. That's $5,000,000,000,000 ! (did I ge the zeros right this time?)
Somehow the new justification for this corporate welfare is "These institutions are too big to be allowed to fail." Can I get a "bulls*^t"? These institutions are going to fail. Not because of "subprime mortgages" but because of the unmitigated greed and stupidity displayed by the financial sector over the past decade. By their nature financial "derivatives" only have a value if you have a sucker, I mean investor ready to buy. As soon as the candy jar (willing investors) is empty the derivatives having no intrinsic value become worthless. But now days there's really no cause for concern. Ben & Hank are in the market for all of the B- paper they can rate AAA and they've got a fist full of our dollars to spend.
I'm with investor Jim Rogers as quoted on bloomberg.com this morning, "`They're ruining what has been one of the greatest economies in the world,'' Rogers said. Bernanke and Paulson are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this.''
Having said that, if there ever was a financial institution that deserved the worst of the collected wrath of every consumer they've "served" WAMU is it.

[William E. Jones]

Looks like Senator Schummer better get back in his office and write some more letters!

[DS]

For the first time in my life I know believe there is small (i mean microscopic) chance that we may go into a depresion (I mean like the 30's). Indymac was just a small bank.

I look at WAMU and realize that they are heading in the same direction of indymac, can the FEDS really handle a mainstream bank like
WAMU going under.

I mean if the Feds swallow up one of these banks it could destroy the FDIC. Once the FDIC fails it would send panic worldwide.

I dont want to sound nervous but its a possibility. Forget about housing, this is a lot bigger we are taking about our jobs and kids

[Joe Smith]

I just had to wire money out of Downey and into another account. I was passed the FDIC insurance limit. Good thing I stumbled upon this article. I would have lost a bundle.

Folks if you have over 100K in cash in one institution I'd suggest you start opening accounts in other institutions so that you're covered with the FDIC insurance. FDIC is good until the Fed goes bankrupt; something this administration is capable of.

[jamie]

Yes, let's hold on to our hats because the world is coming to an end.....please, educate yourselves a bit before posting on a blog.

[James]

I am not scared. Yes, bank institutions over the past few years have been mismanaged and greed has gotten the better of Wallstreet yet again. But thinking long term, I am buying bank stocks NOW. I bought Bank of America and East West Bank Corp and feel they are solid investments. Looking at our real estate from a global perspective, the US is still cheep and people from other countries all considered us to be a great deal. Now, with the dollar in the tank, and the housing market going to down the tubes, there has never been a greater time to invest in companies holding undervalued assets. Buy now, you can thank me in a couple of years when you make 500% on your investment.

[Analyst101]

WaMu is too big to fail.

Their balance sheet shows $10 Billion in cash. $3 Billion a quarter in revenue. And aggressive modeling shows losses closer to $19 Billion. So if you have $10 and earn $12, but owe $19 - you're net +$3 Billion.

The Lehman Analyst is overstating - how often are analysts at the big firms wrong? Put your money where you're mouth is then and trade uncovered Put options on it!

Indymac and Countrywide were bottom feeders. And Bear Stearns would have Domino'd the whole market. If the Fed allowed a run on WaMu - the biggest savings and loan in the U.S. fails - foreign investors yank their money from our system faster than you can say economic collapse.

There is no way WaMu fails - look at the numbers.

[E]

Banks holding undervalued assets?

More like underestimated liabilities.

Alt-A resets a coming and all flavors of HELOC's that you didn't even need a SSN# for.